Malaysia - Construction, Building Materials etc

[winston]

Connecting the Pearl of the Orient by rail

Maintain POSITIVE – GAM preferred Penang LRT pick

We visited the public inspection booth for the Penang LRT Mutiara Line project.

Of great interest to us is the proposed 6 km cross-sea rail link between Penang Island and Seberang Perai.

It is targeted for award in Jul 2026 or 3 months from now.

Due to its complexity, we understand that the job value could range between a sizeable MYR5b and MY8b.

In our view, potential lead contractors are GAM and MMC Engineering while potential subcontractors are YTL, MRC and Dhaya Maju Infrastructure (Asia).

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/524044.pdf

[winston]

Construction (OVERWEIGHT)
A decent start to the year

Domestic contract awards in 1Q26 came in at RM10.8bn (+13% QoQ, -34% YoY).

The YoY dip arises from the sizable infra awards seen in 1Q25 at c.RM11bn (Penang LRT and LRT3 reinstatement project).

Despite uncertainties in 2Q26, we expect full-year job flows to remain resilient versus 2024-2025’s run-rate underpinned by
(i) second wave of DC project rollouts,
(ii) imminent formalisation of large water schemes and
(iii) Penang LRT Segment 2 and Systems package.

Valuations are turning more palatable (KLCON: 15x FY27f) due to sector wide derating since the Iran war.

Maintain OVERWEIGHT with top picks being Gamuda (BUY; TP: RM5.60) and Kimlun (BUY; TP: RM2.01).

Source: HLIB

[winston]

Construction sector poised for steady year

The anticipated rebound in 2H26 will likely be driven by the finalisation of several DC tenders and greater clarity in the timeline surrounding the rollout of large-scale infrastructure projects.

Domestic contract awards reached RM10.8bil in the first quarter of financial year 2026 (1Q26), up 13% quarter-on-quarter but down 34% year-on-year due to the absence of large infrastructure projects seen a year earlier.

Commercial and residential projects were a key contributor, accounting for RM4.9bil or nearly half of total awards.

Residential job flows may soften in the second quarter as developers and contractors adopt a more cautious stance.

Smaller contractors or those with fixed-price legacy jobs are more exposed, particularly if energy-driven cost inflation persists longer than expected.”

Source: The Star

https://www.thestar.com.my/business/bus ... teady-year